UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION. Julie Brill Maureen K. Ohlhausen Joshua D. Wright Terrell McSweeny COMPLAINT

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1 UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION COMMISSIONERS: Edith Ramirez, Chairwoman Julie Brill Maureen K. Ohlhausen Joshua D. Wright Terrell McSweeny In the Matter of Finance Select, Inc. a Georgia corporation. DOCKET NO. COMPLAINT The Federal Trade Commission, having reason to believe that Finance Select, Inc., a Georgia corporation ( Respondent ), has violated the provisions of the Federal Trade Commission Act ( FTC Act ), and it appearing to the Commission that this proceeding is in the public interest, alleges: 1. Respondent Finance Select, Inc., is a Georgia corporation with its principal place of business at 432 Newnan Rd, Carrollton, GA, Respondent operates from five different locations in the state of Georgia and two locations in the state of Alabama. 2. Respondent offers loans secured by consumers free-and-clear car titles ( title loans ). 3. The acts and practices of Respondent alleged in this complaint have been in or affecting commerce, as commerce is defined in Section 4 of the Federal Trade Commission Act. 1

2 Background on Car Title Loans 4. Car title loans can be short term loans and are often advertised as 30 day loans. Title loans have high interest rates and short repayment periods, with payments due every month. In many instances, however, the loans are structured as longer-term, high cost installment loans with payments due over several months. The typical APR of a car title loan can be over 300%. 5. Each additional payment after the first month is termed a renewal. The average consumer does not repay the loan in 30 days, instead renewing the loan an average of eight times. Loan amounts differ but typically are $1,000 and up to $10,000. The lender takes possession of the consumer s car title and charges a monthly fee, sometimes as much as 25% of the amount borrowed per month. For example, the amount of fees would be $250 per month and after eight renewals, a consumer taking out the average loan amount of $1,000 would pay approximately $2,000 in fees. Respondent s Business Practices 6. Respondent offers consumers car title loans, which are secured by the borrower s freeand-clear car title. Respondent offers a 0% introductory interest rate, but the loans are renewed to a much higher interest rate after the first 30 days if the borrower does not repay the loan completely within those 30 days. 7. Since at least January 2012, Respondent has disseminated or caused to be disseminated advertisements promoting its title loans, including on the website on its mobile website of the same address, and on web ads, with the following representations, copies of which are attached as Exhibits 1, 2, and 3: a. The website advertisements, copies of which are attached as Exhibit 1, provide the following disclosures: TITLE LOANS 1 st 30 Days 0% NEW CUSTOMERS No Credit Check b. On Respondent s mobile website, copies of which are attached as Exhibit 2, the advertisement contains the following representation: TITLE LOANS 0% 1 st 30 Days 2

3 c. The web ads appearing as a Google advertisement on the side webpages, copies of which are attached as Exhibit 3, provide the following disclosures: 0% Title Loans Best Rate 1 st 30 days 0%, No Credit Ck, We Loan More, call now fastcashtitlepawn.net 0% Max Cash Title Loan 1 st 30 days 0% Lowest Rates, Call Now! fastcashtitlepawn.net 8. The advertisements, as shown in Paragraph 7, do not disclose: (1) that the advertised 0% offer does not apply unless the loan is completely repaid in 30 days, (2) that there will be a substantial finance charge if the loan is not completely repaid in 30 days and (3) the amount of this finance charge. 9. The advertisements, as shown in Paragraph 7, do not disclose that if the loan is not repaid in full in 30 days, the consumer would be required to pay the finance charge for the first 30 days in addition to any additional finance charges that incur on day 31 (for the second 30-day period). 10. Many of Respondent s borrowers do not repay their loans within the first 30 days, and thus many of its borrowers end up paying finance charges. Count I Failure to Disclose Terms of the Loan 11. In numerous instances, including but not limited to, through the means described in Paragraphs 6 to 10, Respondent has represented, directly or indirectly, expressly or by implication, that it offers title loans to consumers with a 0% finance charge for a 30-day introductory period. 12. In instances in which Respondent has made the representation set forth in Paragraph 11, Respondent has failed to disclose, or failed to disclose adequately: (1) the existence and amount of the finance charge that consumers have to pay for the 30 day introductory period if certain terms and conditions are not met and (2) the existence and amount of the finance charge that consumers have to pay after the conclusion of the 30-day introductory period. These facts would be material to consumers in their decisions regarding Respondent s title loans. 3

4 13. Respondent s failure to disclose, or failure to disclose adequately, the material information described in Paragraph 12, in light of the representation set for forth in Paragraph 11, is a deceptive act or practice. 14. The acts and practices of Respondent alleged in this complaint constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. THEREFORE, the Federal Trade Commission this day of, has issued this complaint against Respondent. By the Commission. SEAL: Donald S. Clark Secretary 4

5 UNITED STATES OF AMERICA FEDERAL TRADE COMMISSION COMMISSIONERS: Edith Ramirez, Chairwoman Julie Brill Maureen K. Ohlhausen Joshua D. Wright Terrell McSweeny In the Matter of First American Title Lending of Georgia, LLC, a limited liability company. DOCKET NO. COMPLAINT The Federal Trade Commission, having reason to believe that First American Title Lending of Georgia, LLC, a limited liability company, ( Respondent ), has violated the provisions of the Federal Trade Commission Act ( FTC Act ) and provisions of the Truth in Lending Act ( TILA ) and its implementing Regulation Z, and it appearing to the Commission that this proceeding is in the public interest, alleges: 1. Respondent First American Title Lending of Georgia, LLC, is a Tennessee limited liability company with its principal place of business at 6045 Century Oaks Drive, Chattanooga, Tennessee, First American Title Lending of Georgia, LLC, operates from 33 different locations in the state of Georgia. 2. Respondent offers loans secured by consumers free-and-clear car titles ( title loans ). 3. The acts and practices of Respondent alleged in this complaint have been in or affecting commerce, as commerce is defined in Section 4 of the Federal Trade Commission Act. Background on Car Title Loans 4. Car title loans can be short term loans and are often advertised as 30 day loans. Title loans have high interest rates and short repayment periods, with payments due every month. In many instances, however, the loans can be longer-term, high cost installment 1

6 loans with payments due over several months. The typical APR of a car title loan can be over 300%. 5. Each additional payment after the first month is termed a renewal. The average consumer does not repay the loan in 30 days, instead renewing the loan an average of eight times. Loan amounts differ but typically are $1,000 and up to $10,000. The lender takes possession of the consumer s car title and charges a monthly fee, sometimes as much as 25% of the amount borrowed per month. For example, the amount of fees would be $250 per month and after eight renewals, a consumer taking out the average loan amount of $1,000 would pay approximately $2,000 in fees. Respondent s Business Practices 6. Respondent offers consumers car title loans in Georgia, purportedly in accord with Part 5 of Article 3 of Chapter 12 of Title 44 of the Georgia statutes relating to pawnbrokers, O.C.G.A. Sections et seq., which are secured by the borrower s free-and-clear car title. Respondent s advertisements state that the title loans are offered at 0% interest rate or 0% interest rate for 30 days. 7. Respondent has disseminated or caused to be disseminated advertisements to the public promoting extensions of closed-end credit in consumer credit transactions, as the terms advertisement, closed-end credit, and consumer credit are defined in Section of Regulation Z, 12 C.F.R , as amended. 8. Since at least January 2012, Respondent has disseminated or caused to be disseminated advertisements promoting its title loans, including on the website on web ads, on billboards, flyers and brochures, newspapers, and yard signs, with the following representations, copies of which are attached as Exhibits 1-12: a. The website advertisements, copies of which are attached as Exhibit 1, provide the following disclosures: 0% Interest FOR 30 DAYS* *Some restrictions apply b. The web search ads, appearing as a Google advertisement on the side of the webpage, copies of which are attached as Exhibit 2, provide the following disclosures: 2

7 Lowest Rate Title Pawns Ask about 0% Interest. No Credit Check. Title Lending Low Rates 0% for 30 days. Get the Most Money. c. A sampling of the billboard advertisements, copies of which are attached as Exhibits 3 5(Exhibit 5 is in Spanish),provides the following disclosures: i. Exhibit 3: 0% Interest for 30 days Certain terms and conditions may apply ii. Exhibit 4: iii. Exhibit 5: 0% Interest 0% Interest Compramos Prestamos Sobre Su Titulo (Buy on your title loans) d. The flyer and brochure advertisements, copies of which are attached as Exhibits 6 8, provide the following disclosures: i. Exhibit 6: 3

8 0% Interest ii. Exhibit 7: 9.5% or lower! Lowest Rates in Town Get up to $5,000 in less than 30 minutes No credit check your car is your credit Lowest rates in town as low as 9.5% Title pawned? We can buy it out! 0% Interest for 30 days (This ad is also in Spanish) iii. Exhibit 8: 0% Interest for 30 days! Rates as low as 9.5% e. The newspaper advertisements, copies of which are attached as Exhibits 9 10, provides the following disclosures: i. Exhibit 9: Lowest Rates! 0% Interest! 4

9 ii. Exhibit 10: 0% Interest! (for 30 days) Lowest Rates! f. The yard sign advertisements, copies of which are attached as Exhibits provides the following disclosures: i. Exhibit 11: 0% Title Pawn ii. Exhibit 12: 0% Interest 9. The advertisements, as shown in Paragraph 8, do not disclose that the 0% offer does not apply unless: (1) the borrower is a new customer of Respondent, (2) the borrower is starting a new title loan and not refinancing a different loan through another title lender, and (3) the loan is repaid in certified funds or money order and not by cash or personal check. 10. The advertisements, as shown in Paragraph 8, do not disclose: (1) that the advertised 0% does not apply unless the loan is completely repaid in 30 days, (2) that there will be a substantial finance charge if the loan is not completely repaid in 30 days and (3) the amount of this finance charge. 11. The advertisements, as shown in Paragraph 8, do not disclose that if the loan is not repaid in full in 30 days, the consumer would be required to pay the finance charge for the first 30 days in addition to any additional finance charges that incur on day 31 (for the second 30-day period). 12. The advertisements, as shown in Paragraph 8.d., display an additional rate of finance but do not disclose the rate of finance charge as an annual percentage rate ( APR ). 5

10 13. Many of Respondent s borrowers do not repay their loans within the first 30 days or do not meet the requirements for the 0% introductory rate, and thus many of its borrowers end up paying finance charges. VIOLATIONS OF THE FEDERAL TRADE COMMISION ACT Count I Failure to Disclose Terms of the Loan 14. In numerous instances, including but not limited to, through the means described in Paragraphs 6 to 13, Respondent has represented, directly or indirectly, expressly or by implication, that it offers title loans to consumers with: (1) a 0% interest rate or (2) a 0% rate of finance charge for a 30-day period. 15. In instances in which Respondent has made the representation set forth in Paragraph 14 Respondent has failed to disclose, or failed to disclose adequately: (1) the existence and amount of the finance charge that consumers have to pay for the 30 day introductory period if certain terms and conditions are not met; (2) the existence and amount of the finance charge that consumers have to pay after the conclusion of the 30-day introductory period; and (3) the conditions to get the 0% rate. These facts would be material to consumers in their decisions regarding Respondent s title loans. 16. Respondent s failure to disclose, or failure to disclose adequately, the material information described in paragraph 15, in light of the representation set forth in Paragraph 14, is a deceptive act or practice. 17. The acts and practices of Respondent alleged in this complaint constitute deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act. VIOLATION OF THE TRUTH IN LENDING ACT AND REGULATION Z 18. Respondent s advertisements promoting title loans, including but not limited to those described in Paragraph 8.d., are subject to the requirements of TILA and Regulation Z. 19. Section 144 of TILA and Section (c) of Regulation Z require that the rate of finance charge must be stated as an annual percentage rate using that term or the abbreviation APR. 6

11 Count II 20. Respondent s advertisements promoting the extension of closed-end credit in consumer credit transactions, including but not limited to those described in Paragraph 8.d., provide a rate of finance charge but fail to state that rate as an annual percentage rate or APR. 21. Therefore, Respondent s practices violate Section 144 of TILA, 15 U.S.C. 1664, and Section (c) of Regulation Z, 12 C.F.R (c). THEREFORE, the Federal Trade Commission this day of, has issued this complaint against Respondent. By the Commission. SEAL: Donald S. Clark Secretary 7